Oil price rise might push peso back to 59:$1
The Philippine peso could slide back past the 59-per-dollar mark if oil prices climb and stay elevated amid the war in the Middle East, a development that would strain energy-importing economies such as the Philippines.
In a note to clients, MUFG Global Markets Research said the local currency might trade between 58.50 and 59.50 against the US dollar should crude prices hold at around $90 a barrel.
Sustained gains in global energy costs, it said, would swell the country’s already heavy import bill, adding pressure on the peso.
Violence escalated over the weekend after the US and Israel attacked Iran, which retaliated with missiles and drones aimed at Israel and neighboring countries that host American forces.
The war has reportedly disrupted traffic through the Strait of Hormuz, a narrow but vital corridor that carries a significant share of the world’s oil exports. This raises fears of supply shocks that could ripple across net oil importers.
Before the latest geopolitical flare-up, the peso had been staging one of its strongest rallies in years. It rebounded from a record weak levels in January to the 57-per-dollar level by late February amid broad dollar weakness.
But the peso retreated back to the 58 level on Monday as the conflict fanned concerns over higher oil prices and a flight to safe-haven assets.
“We now see USD/PHP moving higher in the first quarter of 2026, reflecting recent developments in the Iran conflict, before moving back toward the 58 level in the second half under our base-case scenario,” MUFG said.
They warned that the outlook remains subject to “crucial uncertainty” over the trajectory of the Iran conflict and the path of oil prices.
Separately, economists at JP Morgan Global Economic Research said the key question was whether the Middle East war becomes a prolonged and disruptive conflict akin to the Russia-Ukraine war.
‘Modest’ impact
Even in a worst-case scenario in which global crude prices hold at $80 per barrel through midyear, they said, the drag on the world economy would likely be “modest.”
Under an alternative macroeconomic scenario, JP Morgan sees oil prices staying elevated through the first half of 2026. These would then ease back toward what it considers a fundamental value of around $60 per barrel in the second half.
But for Asian countries such as the Philippines and Japan, where about 90 percent of oil imports come from the Middle East, the risks are more acute.
ING Bank economist Deepali Bhargava warned that any disruption in critical oil shipping lanes could lead to supply shortages, slowing business and manufacturing activity.
Such a shock could also complicate the easing cycle of the Bangko Sentral ng Pilipinas (BSP) at a time when the economy needs support as it recovers from a graft-induced slowdown.
“… a price shock of this magnitude—if it lasts—coupled with currency depreciation could push inflation, for example, in the Philippines to the upper end of the BSP’s target, increasing pressure on the central bank to hold rates instead of cutting further.”
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